Contract manufacturing typically is associated with using an offshore manufacturer to produce products at a lower cost than would be possible domestically. But contract manufacturing also provides opportunities for companies looking to utilize the knowledge and experience of existing manufacturers, both domestic and foreign.
This option allows companies to avoid large capital expenditures on machinery to build product, as well as the operating cost associated with running this machinery. While this can be an attractive option for companies operating in a wide array of industries, the medical equipment and device segment is one where substantial benefits can be realized.
The need for machinery capable of producing precision-dependent products paired with a well-trained, highly skilled workforce could be seen as a barrier by some companies looking to enter the medical device and equipment manufacturing arena as an OEM. These factors can also be the reason why some existing OEMs decide to exit the market altogether.
This does not always have to be the case. There are contract manufacturers who have the necessary equipment as well as a skilled staff capable of supplying precise medical products that adhere to the highest quality standards. This allows the OEM to spend less capital, hire fewer laborers, spend less time on quality control, worry less about purchasing, and know that someone else is ensuring the technical skills of the people involved.
For companies considering transitions or moving production to a contract manufacturer, the process is very much the same as when entering any long-term business relationship – gather as much information as possible and then make an educated, informed choice.
These guidelines can help establish a successful partnership between a medical industry OEM and a contract manufacturer.
- Finalize Design Considerations
While contract manufacturing allows shifting of many responsibilities to the contract manufacturer, the task of clearly defining the requirements and specifications required for the product remain with the OEM. Create a part that can be successfully manufactured without being cost prohibitive, and that will function as designed when assembled or completed. This process needs to consider not only the form of the part, but also material composition, product lifecycle, and any standards that must be adhered to during the manufacture and use of the product.
- Contractor Selection
Choosing an appropriate contract manufacturer requires trust, but this trust must be bolstered with diligence on the part of the OEM. There needs to be a thorough understanding between the OEM and the contract manufacturer of its capabilities, strengths, weaknesses, and relevant experience with manufacturing similar products.
- Knowledge Transfer and Process Development
After an agreement has been reached, the work of developing the manufacturing process for the product begins. If this is an existing product being transferred from the OEM, all existing work instructions and current raw material sources should be shared with the new contract manufacturer. If this is a new launch, the contract manufacturer will be tasked with developing the assembly flow and work instructions for the build; the OEM may assist the contract manufacturer with this process.
- Supply-Line Development
The raw material and/or ancillary part supply chain should be established. Finding and building strategic relationships with suppliers who can meet and exceed any processing or quality standards is only one aspect of supply line development. The process also needs to include risk management, so that interruptions in raw material deliveries are essentially eliminated. This can be accomplished by verifying the capacity and fiscal soundness of several potential suppliers for each raw material or outsourced component.
- Training and Process Qualification
Once the flow, work instructions, and components are all in place, operator training and qualification start. Whatever the product is, there is an optimum process for making it efficiently with adherence to rigorous quality standards. This process needs to remain consistent. The contract manufacturer's design and engineering team will need to create custom manufacturing instructions that are critical to turning out finished products that meet high quality standards.
- Pilot Builds
Pilot build is where all the preparation by both the OEM and contract manufacturer shines through, with the production of the first part coming off flawlessly. More than likely though, that will not be the case, with opportunities for improvement being identified. Work flows can be tweaked, machine settings can be adjusted, and work instructions can be improved.
- Entering Production
When the pilot builds have been satisfactorily completed, the production phase is entered. For this to unfold as seamlessly as possible, there must be a solid production plan in place –employing an accurate demand forecast that is the basis from which stock levels, reorder points, and raw material procurement schedules are derived. Finally, shipment of finished product needs to be coordinated in advance. Having a contract manufacturer who is willing to maintain stock at their facility can be advantageous. Similarly, a manufacturer who has the flexibility to make JIT shipments or drop ship to individual customers can greatly increase service levels and customer satisfaction.
Contract manufacturing provides a tremendous opportunity for medical industry OEMs who want to focus on their core competencies and not the process of manufacturing their product. Taking a methodical approach to selecting a qualified contract manufacturer ensures that the transition will avoid setbacks from the knowledge transfer phase, all the way through the pilot build and production phases.